Yet Another Assault On Freedom Of Contract And Property Rights
Once cornerstones of America, freedom of contract and property rights are being reduced to rubble by federal, state, and local officials. A case arising out of an ordinance passed in Seattle is illustrative of the trend.
On January 1, a new law took effect there, mandating that landlords rent available apartments to the first prospective tenant who meets “all the screening criteria necessary for the approval of the application.” Under Seattle’s “first in time” rule, landlords cannot see if several people apply and then choose the one they prefer. If a landlord were to do that, he’s now guilty of an “unfair practice” and subject to both city fines and suit from any aggrieved renter.
That law continues and extends the sad politicization of the housing market, with government officials exercising their coercive power and turning landlords into vassals. But it is being challenged in court by a family that wants to preserve what’s left of their contractual freedom.
MariLyn Yim and her husband own one duplex and one triplex in Seattle. They and their three children live in a unit of the triplex and rent the other two. They do not want to give up the right to choose which tenant will move in and live next to them. Compatibility and safety are of great concern to them. The Yims state in this Pacific Legal Foundation press release “We are, literally, mom-and-pop property owners renting out our home to make Seattle affordable for our family….We aren’t corporate landlords sitting on large capital reserves or with hundreds of rentals to spread our risk. One bad tenant could take us years to recover from financially.”
Pacific Legal is representing the Yim family and other plaintiffs in a suit challenging the legality of Seattle’s “first-in-time” mandate. Their argument is that the ordinance violates Washington’s state constitution, specifically its provision that private property may not be taken without payment of just compensation. Washington Supreme Court precedents have established that this language, similar to that of the Fifth Amendment of the U.S. Constitution, includes the right to sell or lease your property on a nondiscriminatory basis to an individual of your choosing.
Pacific Legal’s attorney handling the case, Ethan Blevins, argues, “By telling landlords, including mom-and-pop property owners, that they have basically no say in who can live in their rental units, Seattle is stripping them of a fundamental right….This amounts to a taking of private property rights and government can’t do that without reimbursing the property owner.”
The suit has just been filed in King County Superior Court. You can read the complaint in Yim v. City of Seattle here.
I hope the plaintiffs and PLF triumph in the case, but it’s sad that they have to bring it under a takings theory. Seattle isn’t actually seizing the property of landlords for some public use; what it is doing, rather, is dictating to them how they must contract
with would-be renters. The city’s aggression here lies principally in its abrogation of the most fundamental right of any contracting party, namely the right to say “no.”
The first thing a student learns about contract law is that to form a contract, you need voluntary consent from both parties. Under common law, prospective sellers had a perfect right to say “no” to any offer, just as prospective buyers had a perfect right not to make an offer. If common law still prevailed in Seattle, the Yim family and all other landlords would be free to decline to rent to someone for reasons sufficient only to themselves: because the person looks unreliable; because the person smokes, because the person is wearing a Make America Great Again cap, etc.
And that right would symmetrical with the right of all prospective renters to look at the properties available on the market and pass any of them by for reasons of their own: because the apartment is not in a good enough area; because other tenants look unpleasant; because the owner wears a Make America Great Again cap, etc.
Sadly, there is little left of the common law of contracts in the U.S. Governments have been dictating to people how they must contract for many decades, and recently they have even taken to punishing people for not choosing to make a contract.
The Constitution does have a provision (in Article I, Section 10) declaring that states may not pass laws that “impair the obligation of contracts.” The Contract Clause, however, has been rendered almost a dead letter by generations of legal decisions saying that government may indeed impair (i.e. rewrite so as to benefit one party) contracts if the law doing so can be said to somehow protect the health, safety or morals of the people under state “police power.” Those “police power” exceptions, however, have become so numerous that they almost entirely swallow the rule. (For an excellent exposition of that, I recommend The Contract Clause: A Constitutional History by Professor James W. Ely, Jr.)
Our courts have sometimes decided to protect contractual freedom. The most famous case is Lochner v. New York, where (in 1905) a majority struck down a statute putting a limit on the number of hours a baker could contract to work in a week. That case, however, was not argued under the Contract Clause, but instead under the Fourteenth Amendment’s provision that no state may deny a citizen life, liberty or property without due process of law. Justice Peckham’s opinion held that contractual freedom to decide how many hours you want to work is part of the liberty protected under that amendment.
Unfortunately, using the Fourteenth Amendment to shield people against laws that deprive them of the freedom to enter into contracts as they see fit — or decline to do so — has been out of jurisprudential style since the 1930s.
It would be simply astounding if any court today used a Fourteenth Amendment due process rationale to strike down a law that deprives Americans (such as the Yims) of their contractual freedom. Thus we are left with arguments that attacks on it are
unconstitutional because they violate the Fifth Amendment (as in this case), or the First Amendment’s free speech or free exercise of religion clauses.
What those arguments miss is the fact that contractual freedom is every bit as essential to a civilized nation as are property rights, freedom of speech, and freedom of religion. It will be a fine day for America if we ever get back to just protecting freedom of contract straight up, for everyone.
Originally published on Forbes.